The recent volatility within the cryptocurrency markets has led a significant amount of Bitcoin to change hands, with massive selling pressure overwhelming buyers and resulting in a capitulatory decline that led it to drop from highs of $10,500 to lows of $3,800.
This volatility may ultimately be a net-positive for the benchmark cryptocurrency, however, as its absolute scarcity means that the recent selloff resulted in an on-chain shift of BTC from “weak hands” to “strong hands.”
This has led one analyst to note that it is irrational to be highly bearish at the moment, as this simple fundamental shift in BTC ownership should be a catalyst for significant fundamental strength.
Bitcoin volatility catalyzes a massive shift in ownership
It’s no secret that 2020 has been a volatile year for Bitcoin and the aggregated cryptocurrency market, with the largest crypto by market cap rallying from early-January lows in the lower-$6,000 region to highs of $10,500 in mid-February.
The fleeting break into the five-figure price region led to a resurgence of bears that had been hibernating for the first part of the year, with the massive selling pressure incurred here leading to an intense selloff that resulted in BTC dropping to as low as $3,800 on most major exchanges.
Although Bitcoin has since recovered – recapturing the $6,000 region – it is important to note that a significant number of “weak hands” likely exited their BTC positions during the course of the recent capitulatory selloff.
The buyers of these positions were likely those with more confidence in the digital asset and the market surrounding it, which may make them less prone to selling their positions in the near future.
Analyst: BTC ownership shift to negate macro bearishness
The recent selloff may have done some damage to the cryptocurrency’s macro market structure, but it is important to note that Bitcoin Jack – a well-respected cryptocurrency analyst on Twitter – questioned how one can be bearish while considering the fact that weak hands have largely been flushed out.
“Millions of BTC (note: there are only ~18 million and some are lost) shifted from weak to strong hands on chain. Billions (USD) in contracts on derivative exchanges shifted from weak to strong hands. Serious question, considering the limited supply, how can you be bearish?”
If those who were buying Bitcoin during its recent plunge are long-term holders, the crypto may see some of the intense selling pressure it has been facing alleviate in the weeks and months ahead.
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